Governance Bites #152: Managing the board-management interface, with Laurence Kubiak

Laurence Kubiak brings a rare combination of executive leadership and boardroom governance experience across the private, public and not-for-profit sectors. He is Chief Executive Officer of Nautech Electronics Ltd, New Zealand’s largest independent contract electronics manufacturer, and serves as a director of Northpower Ltd. Laurence previously chaired Trustees Executors Limited and the New Zealand Symphony Orchestra, bringing deep insight into governance across regulated, commercial and cultural organisations. Earlier, he was CEO of New Zealand Institute of Economic Research, advising decision-makers on economic policy and strategy. With an international career spanning energy, telecommunications and infrastructure, Laurence offers a global perspective on governance, regulation and strategic oversight.
Where does oversight end and "meddling" begin? In this session, Laurence Kubaik joins Mark Banicevich to dissect the delicate balance of the board-management interface. They explore the critical Chair-CEO dynamic, strategies to transform "information overload" into actionable insight, and how to provide robust challenge without undermining executive authority. Laurence offers practical advice for maintaining trust, setting boundaries, and fostering a culture of candor that drives performance. 
Whether you’re a seasoned executive or a first-time director, this interview provides the roadmap for a high-functioning partnership that eliminates friction and focuses on results.
#BoardManagement, #CorporateGovernance, #ExecutiveLeadership, #ChairCEO, #LeadershipDynamics, #BoardOversight, #StrategicLeadership, #BusinessGovernance, #OrganizationalCulture, #TrustInLeadership, #EffectiveBoards, #ManagementInterface, #DirectorTips, #CorporateStrategy, #BoardroomInsights

Transcript

0:00

Hello everybody. My name is Laurie Kubiak. I'm a New Zealander, but I went overseas straight after university and I had a good executive career in first of all the energy industry and then in ICT [Information and Communications Technology] telecom. In those years, I started reporting to boards and then when I came back to New Zealand 13 years ago, I went to the other side of the table and started working in governance. I've also done a couple of CEO [Chief Executive Officer] roles in my years back in New Zealand as well and also have some experience of business ownership. So, I'm very pleased to have this opportunity to speak to Mark. And Mark, I think you've got some questions for me. Indeed. Today we're going to talk about managing the board management interface. Okay. Hi, my name is Mark Banicevich. Welcome to Governance Bites. Today I have the absolute pleasure of spending more time with Laurence Kubiak. Laurie, thank you very much for your time. I really love conversations with you. You've got such a depth of knowledge and a really cool style of communication that I enjoy. So, I really appreciate your time. Thank you. This concept of managing the board management interface, to start with, at a fundamental level, what does a healthy board management relationship look like? Oh, it should be mutually respectful. It should be collaborative. But each should have their own province which is not hermetically sealed, because the board needs to be looking at what management are doing. And management needs to know what the concerns of the board might be, or the objectives of the board might be. But I think where it goes wrong, from the board side of the sketch, is directors getting too involved in the weeds, and the nuts and bolts of executive management. And that's quite common. It's quite common I think with new directors when they're in their noisy phase. And I think it's very, very unsettling and undermining for the management, and it's not good for the directors, either, because they should be focused on different things. Do you think that would arise because new directors are often coming out of executive roles and that's the space they're used to? And so that shift from being an executive to being a director is actually a much bigger shift than many give it credit for. Could that be a driver of that, to speak so? I think so. Yes. That certainly. Also, when someone joins a board,

it's tantamount to saying in a way: 2:35

"Look, you're particularly experienced in this area," or, "You're an expert in this area." And maybe when directors join boards they feel they need to prove that and so they, "My expertise is here, therefore I'll go and interfere with this part"of the business because that's my expertise and I can really help those people over there,"because I've got all this experience that they don't have". There are times when that's true, actually, when sometimes there is a good case for a director to go and offer some particular insight or expertise to some operational problem. But generally speaking, no, it's very important that management is allowed to get on with the things that they're good at and that they're reporting on and that they have KPIs [Key Performance Indicators] on, and for the board to focus on the strategy, on the value creation, on all the things that the board is there to do. So, what would you do on a board where somebody is getting too far into those weeds, where they shouldn't be? How do you react to that as a director, or as a chair? It's the role of the chair to pull that back, of course, and just to have the conversation. Most of the time, or on the occasions where I've seen it, there is actually no problem. So there's nothing going off the rails on the management side. It's just a new director with a particular field of interest or expertise that they feel they need to bring to bear on that. The forum for that is the board meeting. And that's the appropriate point for help, for support, and for challenge. It's not through having direct access to the executive teams that are working on whatever the matter of interest might be. Right. How critical is the relationship then between the chair and the CEO in setting the tone for that interface between the board and management? Absolutely critical I would say. I mean the CEO occupies a unique position. He really is the mediator between the board and the executive. And he is the one who takes the board's strategic requirements, their long-term thinking, and translates that into operational plans, with the support and the help of his executive of course, and who, often, who reports that out back to the board. Although my personal preference is that people responsible for those programmes should actually report those themselves. Because I think if you do that, you get a slightly different dynamic between the CEO and the director where the CEO has a certain detachment, is not so invested in whatever the programme might be. And that perspective is very useful in informing the board as to giving insight as to what's going well, or what could be improved, or what needs to be jettisoned. So, I think it's the most crucial relationship, the relationship between the CEO and the board. Another point where it goes wrong, I've occasionally seen this, actually more often when I was on the other side of the table, when I was reporting to boards. I've seen directors get involved in hiring decisions, maybe a couple of layers below the CEO position, and say, "You need to use this person,"not that person". I think that's very poor. That's very undermining. And it takes a lot of agency around the management team, and their own informed judgment, which I think needs to be resisted. I mean the key thing here is the management tea,m should feel challenged and supported by the board. Yes. Yeah. Okay. That's a nice pickup. Thank you. We talked offline a little bit actually about the businesses where, particularly where the owner is the CEO and they'll often sit on the board, as well. In some cases, the chair. So if the chair is the CEO, are there any risks around that interface when that convergence of seats happens? Yes, I mean, look, I'm in that position at the moment, in that I'm an owner of this business and also the CEO and on the board. So I'm in that position at the moment. I think one of the key things that needs to be considered is that the board is there to represent in one sense the interests of the owners. And particularly under New Zealand law, it's quite interesting because as directors, we owe our duties to the organisation. What does that mean? That means that we're there to improve the organisation, to improve the health of the organisation, to take it forward to a better future. Now, by doing that, we should be acting in the interests of the owners of the organisation, as well, who we're there to represent. So if you think of it under that construct, it makes sense. Where it gets difficult I think is where you have perhaps an executive chair who isn't an owner, where, which is a situation you often see in [US] American boards, where the risk, the danger there is that they see the board as a sort of rubber stamp of the stuff that they want to do anyway, or perhaps more in the nature of an advisory board than a governance board. That way, I think you can see some very suboptimal outcomes, because the separation of powers is not appropriate, is not being appropriately applied - Yes. - in that circumstance. I think this is something else that we touched on offline a little bit earlier as well. You mentioned before about your primary duty is to the organisation, and that is fundamentally through, then the next step of that is the shareholders. You're representing the shareholders. But in our mindset, when you represent, you're acting in the best interest of the organisation, you're thinking about not only today's shareholders but future shareholders, as well. Yeah. Whereas that American mindset will quite often lead to thinking of today's shareholders, and be a little bit more limited. And we talked about how, in the United States, there's a tendency for companies to rise and grow, and explode, and then plateau, and then ultimately decline. Yes. Whereas in the western world, if I can say that, western excluding the US, with that more long- term thinking, you don't want the company to decline. You want it to move into its next iteration, and go forward into a new future. Well, that's right. And there can be a real tension between that short-term thinking and the long-term thinking. And look, you need both. But that's why you have a board and an executive. You have the board to look after the longer term value creation, and the executive to make sure that everything's running as it should be in the here and now. But you know sometimes there will be a tradeoff between, you might have to take some lower returns or even losses in the short term to build a better position for the future. I think a good board will have the courage to do that. But if you're a publicly listed board, and there's shareholders at the end of this, and they bought a yield share, and they want their number every month, every quarter, that does get hard. So that's a very difficult circumstance. Yeah, right. What practices help maintain trust and transparency between the CEO and the chair? I think board only time is actually really important. So the in camera time between the board and the CEO, I don't believe in ever skimping it. I think that's where you can have those gloves off frank discussions about what, from both sides, what might be concerning either side. So I think that's a very, very good practice. The sort of board meeting where there is no board only time, and the CEO just comes up and reports the quarterly results, I think, yes, it doesn't lack value, but it's not getting the most out of that relationship. But I think to have free form conversations with the CEO where, you know,"We're thinking of this. What are you thinking?" Where you bounce ideas off each other, and I think often that's where the magic occurs. And in a less formal way, as well. Because one of the advantages of having a board which has different backgrounds on it, is those different perspectives can bring to bear on the CEO, who by definition is an expert in whatever the company is doing. If he's not an expert on the day he joins, he will be by the time he's been there a couple of months. So to be able to give that input to him, not constrained by a formal presentation, or formal board papers, or being on the record, on the minute, I think's really valuable. So I think if I were to point at one thing, it would be that. Right. Right. One common complaint from boards, and we talked about this I think in our previous conversation, about information overload. Yes. We're getting massive board papers and quite often a lack of insight in that information. How can that be addressed? Well yes, it's a real problem. I'm a fan of fewer more meaningful KPIs [Key Performance Indicators]. I completely get that department by department there will be more KPIs monitored, reported against, but I don't want to see them all. That's a management job. That's the management job. As a board member, I'm focused on achieving certain outcomes, or being on the trajectory towards certain outcomes, and I'm only really interested in the KPIs that lead to those outcomes, that support those outcomes. So actually reporting and monitoring fewer things is a good thing. What about the length of individual board papers? Earlier in my career, I had to write to a page length. And that was a really good discipline actually. If we couldn't get it onto six pages, then we had to break the decision down. That doesn't seem so common anymore. I am now, I was very young. I'm remembering the '90s. But it wasn't actually unusual back then. But I haven't heard of many boards doing it now. But I was on the supply side in those days, and I found it, really hard to do and really valuable to do, because it makes you focus on what are the essential data points that bear on this decision, and take the noise away. I think with modern practices, particularly with the increasing prevalence of PowerPoint presentations in board packs, some of that thinking's gone away, and you get a lot of, you get this fire hose of information and it can be difficult to distinguish the noise from the signal. Is there a difference in (and I don't know the answer to this question) is there a difference in the pressure that executives are under now, or the cadence of meetings, that they just don't have the time that used to be taken, or is it simply a discipline thing? I think it's a bad practice to have an internal industry in a company around servicing the board. But I've seen this happen. Right. And people producing large presentations or papers because they feel they need to. I prefer shorter, more meaningful packs with dashboard reporting. I'm a fan of it. In my dashboard that I have here, I just have four quadrants and lead and lag indicators in each one. Yes, absolutely. And so I can see where I'm going, and I can see where I've landed. And if something on the lead is going awry, then I need to dive deeper. But if it's not, I don't. So that kind of thinking, you know, management need to do what they're doing; they need to keep everything running in the here and now. They need to keep the assets well managed in the here and now. But the board is doing something different. They're the stewards of the business; they're looking after the future value, and making sure that we're tracking towards that. So those KPIs, those dashboards will reflect the KPIs you were talking about before that are moving in the direction of strategy. Yeah, I'm a big fan of the shorter reports,

and of that old Blaise Pascal quote: 15:06

"I would have written you a shorter letter,"but I didn't have time". [Letter 16, December 1656.] Yes. And I think the time should be taken to shorten those papers and pull the key information out so that the directors can very quickly get to the nub of what the problem is and know what they're being asked to do. It's really important. And the magic in a board meeting is the discussion. Yes. It's not actually the paper; the paper is just there to provoke a discussion. Right. And it's too easy to fall into the trap, if you're on the supply side, of writing a paper that preempts the discussion, that says "The obvious truth is this one,"and here are all the data points that support that". No, it's about the discussion. That's really where you want the benefit of having those different perspectives, those different insights, bearing on whatever the approval or the decision happens to be. So you'd like to see board papers that present options, not just one to say,"this is what we..." To say a little bit more around,"These are some options we've considered,"and we like this option and this is why"? I do. I like that kind of thinking. Your preferred option might be this, option A, but I want to know, on all the relevant dimensions, why option A is to be preferred to option B. And I'd be very suspicious if there weren't something in option B that wasn't better than option A. And we need to explore those things. Yeah. Right. How can directors provide robust challenge without undermining management authority? I think the formality of the meeting helps there. And I think actually the, again, the construction of the papers. As I just said, if it's conducing towards that rich discussion, then there will be enough challenge to help management in what they need to do. I've sometimes seen the practice, which I think is very good actually, where management will put up a paper and say, "We welcome especially board challenge on this point,"this point and this point". I think that's a very good practice. So, if we saw more of that. And it says to management that this is actually a collaborative process in which we have separate roles to play, but actually the point of coming together is that there is some challenge. Challenge on the decisions and accountability on the results. That's really why you have the board meetings. Yes. Yeah, okay. How should executives respond when they feel the board's overstepping into management? Is there anything the executives could do in that situation? Oh gosh, that's hard, isn't it? Because they're inhibited, because there's a sort of automatic assumption of hierarchy, which, thinking about it, is a bit silly, because the point about the board and the executive is they do different things in the service of the same organisation. They don't do the same thing. I think through the CEO is the best way, saying,"I'm feeling that the board is being inappropriate"on this thing." And so you need a good strong CEO that's willing to manage that with the chair, through the chair. Right. So that's the most appropriate challenge. But I think the harder problem is the cultural one of getting people to speak up when they feel that's happening. Because people, you know, they're nice. And it often presents itself

to executives as an offer to help: 18:31

"I can help you with this thing." And by doing that, they're subtly undermining whatever that manager is trying to do. And that manager is always going to be much closer to the live issues on the day, and the people through which they have to act to get whatever it is done. And if someone from the board side comes into that, all those delicate balances, it's easy to disturb them. The right place to have that kind of discussion is in the board meeting, where that level of interference isn't really possible. And where the chair and the chief executive can put the brakes on it as appropriate. Yes. Actually on that note, how do you feel then about the relationships, or having relationships, between board members and executive members? And what are the benefits and risks of having direct relationships between those two parties? I prefer everything to go through the chair and the CEO. In the first instance, there will be occasions where of course it makes sense with someone in a, with a particular expertise to work directly with that executive. But the CEO and the chair should be fully informed of that. And it should all be agreed upfront. Right. Yeah, that makes sense. What behaviours from boards help build a culture of openness and candour with the executives? Being open and candid themselves. Right. And I think to the extent that you can have some humility, and recognise the things that you don't know. Those Rumsfeldian [Donald Rumsfeld] known unknowns. I think that helps, as well. I think just saying, well, the point I just made actually. You know, the, who are the experts in the organisation? It's the people who are running the organisation, it's, directly; the board is at one removed from that. And particularly if it's a new director, their experience may be utterly at variance from that, and that's the value. But having the humility to recognise that, and to be willing to understand things before intervening, or offering to intervene, I think's a huge point. Again, the formality of the engagement is a big help, as well. Yeah, thank you. I've got one final question for you. Again, a general one. Yeah. What advice would you give to a first-time director? Oh, shut up and listen. Right. Right on the last point, yeah. If it's your first board meeting, you don't know nearly as much as you think you do. It will take you two or three meetings to realise how much you don't know. Until then, you should just be a sponge. You should be soaking things up. You can ask probing questions, of course, to assist your understanding, but in that initial phase, you're building up your picture of the organisation. And you're testing your understanding of the organisation. Going in as a noisy director with your size 10s [shoes], and saying,"My experience is so impressive that I can tell you how to do this, this, and this," is the wrong approach. Right, yes. And so how much involvement would a new director then have with the chair offline to get that deeper understanding? A lot. I mean, one of the key signs of a disengaged board, I think, is where everything that happens, happens in the board meeting. I know not everybody agrees with this, but I think actually a lot of the important things happen between the board meetings, in the conversations between directors, and between directors and the chair. I think that's actually very important. My own practice, I occasionally, I never approach the CEO of an organisation of which I'm on the board without at least involving the chair. But sometimes that, once you've done that, it can be appropriate to do that. But I think being a board member is not about just the meetings; it's about what happens between the meetings, as well. How much of those conversations are bilateral or trilateral, rather than the whole board? A lot of them, I take it, would be. Is there a risk, then, of establishing sort of many power cliques within the board? Oh, I suppose so, but I've been fortunate in my boards and I don't think that's happened. But I know of other boards where that has happened. That really is a matter for the CEO - sorry - for the chair. For the chair. For the chair, for the chair. If he's got board members hunting as a pack, and with a particular axe to grind, then the board composition is wrong. It needs to be changed. Yeah, great. Laurie, that's been awesome. Thank you so much again for your time. Yeah, thank you. I'll look forward to keeping in touch and catching up again soon. Hopefully a beer or something. And to seeing you next episode. Bye now. Thank you for watching this episode of Governance Bites. We have more episodes on YouTube and your favourite podcast channel where I interview directors and experts on various topics relating to boards of directors and governance. We'd love to see you back and please like, subscribe, and share the videos and podcasts.